Understanding how to manage offer conditions during a home transaction – from the offer through to the closing process – is important for both buyers and sellers. At Bōde, our belief is that homeowners are completely capable of buying and selling properties on their own, without an agent, when given all the proper tools, data, and information. Below, we outline the most important aspects of conditions so that homeowners and first-time buyers are empowered with the knowledge they need during their home transaction.
What are Conditions?
Conditions can exist on both the buy and sell side of a real estate transaction. They are stipulations that must be met and removed from the offer contract before specified dates in order for the home sale to become firm. The length of conditions is most often 5-8 business days, but can vary based upon a lot of factors – especially market dynamics. View current market data here.
The most typical buy side conditions include:
- Financing – conditional on the buyer being able to successfully obtain financing from a lender in order to purchase the home.
- Home inspection – conditional on the buyer having a home inspection conducted and the results of that inspection. The buyer may choose to either revoke the offer OR renegotiate price or terms of items to be fixed prior to possession if they are not satisfied with results from the home inspection.
- Sale of the buyer’s home – conditional on the buyer being able to successfully sell their own home.
The most typical sell side condition is applicable during a back up offer scenario, which is that the offer is conditional on the collapse of an already existing offer.
Terms vs Conditions
Both terms and conditions are important aspects of a real estate home transaction. A term outlines the way in which a buyer and seller will cooperate while moving towards the sale. For example, how many walkthroughs will be allowed prior to the possession date of the property or a repair that must be completed prior to possession. If the seller fails to comply with a term, their sale will still go through but the buyer could attempt to get financial compensation.
Conditions differ from terms because they are stipulations that if not met will collapse the deal. A buyer can collapse the deal based on any of their conditions, however the seller could ask for documentation proving that the buyer cannot actually meet that condition (example: did not obtain financing). It is very rare that sellers ask for this or would pursue legal action against the buyer on this basis, but it is important to know the potential consequences.
In a very hot seller’s market, it is common for sellers to receive unconditional offers as a buyer’s attempt to make the deal firm immediately and therefore making their offer more appealing than the competition. This can be a risky move for buyers but can sometimes become necessary to have an offer accepted depending on the state of the current market. Check out on blogs on ‘Tips for Buyers when Negotiating in a Hot Seller’s Market’ or ‘Tips for Sellers when Negotiating in a Hot Seller’s Market’.
It’s important when negotiating an offer to thoroughly review any changes during the counter offer process, including those of conditions, prior to signing. Any change in conditions MUST be initialed by all parties. Bōde provides a comprehensive digital platform in combination with Docusign to create an easy and streamlined negotiation process.
Sometimes, a condition is not able to be met by the set out date in the offer agreement. When this happens, the buyer can request an extension on this condition at the discretion of the seller. The seller is allowed to reject this request if they choose, with the knowledge that this will make the offer void. Any extension must be put in writing by amending the existing contract which then needs to be signed by all parties.
The seller may ask that other conditions be removed if another condition is being extended. For example, the seller may grant the extension for financing but ask the buyer to remove the home inspection condition in exchange so that they are guaranteed to not have the agreed upon price renegotiated due to an inspection.
If a condition deadline is missed without being waived, the contract becomes null and void. This makes it extremely important for both sides to know the condition deadlines.
Conditions are removed from the offer as they are completed by either side of the party. Remove/waive/satisfy all mean the same thing – that you are removing that condition to your offer. Removal of conditions needs to be in writing and this can be done conveniently from the Bōde platform. The conditions are unilateral so they only needs to be signed by the party who owns the condition or the party who the condition is to their benefit. Once all conditions are removed, the deal goes from being a conditional offer to a firm sale.
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